Dec 14 - Standard & Poor's Ratings Services said today that its A-2
short-term rating on Harley-Davidson Inc.'s (HDI) $1.35 commercial paper
program is unaffected by the company's plan to merge Harley-Davidson Funding
Corp. into Harley-Davidson Financial Services Inc. (HDFS), effective Jan. 1,
2013. As a result of the merger and dissolution of Harley-Davidson Funding Corp.
into HDFS, HDFS will be the new issuer of the commercial paper program. HDI
intends to use the proceeds for general corporate purposes. All other ratings on
HDI, including the 'BBB+' corporate credit rating, remain unchanged. The
long-term rating outlook is positive.
HDI's $1.35 billion revolving credit facilities, of which HDFS is a borrower,
back up the company's proposed commercial paper program. Harley-Davidson
Credit Corp. will provide an upstream guarantee with respect to the principal
and interest, and HDFS has a support agreement with HDI whereby HDI can
provide certain financial support in order to maintain certain financial
covenants at HDFS.
Our 'BBB+' corporate credit rating on HDI reflects our assessment of the
company's business risk profile as "satisfactory" and our assessment of its
financial risk profile as "modest," according to our criteria.
Our assessment of HDI's business risk profile as satisfactory reflects the
company's strong brand and 56.5% market share of the U.S. heavyweight (651
cc-plus) motorcycle market in 2011, as well as our expectation for continued
improvement in operating trends. Susceptibility to supply-chain disruptions,
changes in discretionary spending patterns, and a lack of diversity somewhat
offset the strengths.
Our modest financial risk profile is based on credit measures that remain
strong for the rating, including adjusted debt to EBITDA that we expect to
remain below 1x. Management's commitment to maintaining the equivalent of a
year of liquidity on the balance sheet also supports our assessment of HDI's
financial risk profile as modest. Furthermore, while HDI still relies on the
securitization markets to fund receivables at the retail level, we believe
diversity of funding has lessened this dependency.